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What the insurance companies don't want you to know
gregbolshaw
Posts: 6 Forumite
...or at least, what they don't want to tell you about.
The long version
It was renewal time for our two car insurance policies. Prudential turned out cheapest for both, partly thanks to Quidco's generous £130 cash back.
While applying for the first policy, I compared paying monthly against making a one-off payment for the year. I was asked to select a preferred date for the Direct Debit payment to be taken. I selected the 7th of the month (conveniently a couple of days after we get paid), and was presented with a whopping 24.1% APR for the privilege of paying monthly! I went back and changed this to the 1st, only to find that this had now dropped to much lower but still painful 20.6%. Out of curiosity, I decided to try every day of the month. Here are my findings:
1 20.6%
2 20.5%
3 20.4%
4 20.3%
5 20.1%
6 20.0%
7 24.1%
8 24.0%
9 23.8%
10 23.6%
11 23.5%
12 23.3%
13 23.1%
14 23.0%
15 22.8%
16 22.7%
17 22.5%
18 22.4%
19 22.2%
20 22.1%
21 22.0%
22 21.8%
23 21.7%
24 21.5%
25 21.4%
26 21.3%
27 21.1%
28 21.0%
How could it be that what at first appeared to be a question asked out of courtesy could vary the APR between 20.0% and 24.1%? Further more, I couldn't find anything in Prudential's online help or terms and conditions that said that this would be the case. Is it that certain days of the month are weighted, or was there another reason? I quickly made the decision not to pay such high levels of interest, paid the amount in full and moved on to the second policy.
For this policy, I found that the APR ranged from the same 20.0% to 24.1%, but this time it had been shifted as follows:
1 22.3%
2 23.3%
3 23.1%
4 23.0%
5 22.8%
6 22.7%
7 22.5%
8 22.4%
9 22.2%
10 22.1%
11 22.0%
12 21.8%
13 21.7%
14 21.5%
15 21.4%
16 21.3%
17 21.1%
18 21.0%
19 20.9%
20 20.8%
21 20.6%
22 20.5%
23 20.4%
24 20.3%
25 20.1%
26 20.0%
27 24.1%
28 24.0%
It suddenly struck me. The start date of the policy is used as part of the interest calculation. The first policy was due to start on the 7th of the month, with the 6th having the lowest APR. The second policy starts on the 27th, with the lowest APR charged on the 26th. So to summarise my findings:
The short version
If you want to pay for your car insurance (or indeed any insurance) by monthly Direct Debit, set the payment date to the day before the start date of the policy as you will pay the lowest APR.
The long version
It was renewal time for our two car insurance policies. Prudential turned out cheapest for both, partly thanks to Quidco's generous £130 cash back.
While applying for the first policy, I compared paying monthly against making a one-off payment for the year. I was asked to select a preferred date for the Direct Debit payment to be taken. I selected the 7th of the month (conveniently a couple of days after we get paid), and was presented with a whopping 24.1% APR for the privilege of paying monthly! I went back and changed this to the 1st, only to find that this had now dropped to much lower but still painful 20.6%. Out of curiosity, I decided to try every day of the month. Here are my findings:
1 20.6%
2 20.5%
3 20.4%
4 20.3%
5 20.1%
6 20.0%
7 24.1%
8 24.0%
9 23.8%
10 23.6%
11 23.5%
12 23.3%
13 23.1%
14 23.0%
15 22.8%
16 22.7%
17 22.5%
18 22.4%
19 22.2%
20 22.1%
21 22.0%
22 21.8%
23 21.7%
24 21.5%
25 21.4%
26 21.3%
27 21.1%
28 21.0%
How could it be that what at first appeared to be a question asked out of courtesy could vary the APR between 20.0% and 24.1%? Further more, I couldn't find anything in Prudential's online help or terms and conditions that said that this would be the case. Is it that certain days of the month are weighted, or was there another reason? I quickly made the decision not to pay such high levels of interest, paid the amount in full and moved on to the second policy.
For this policy, I found that the APR ranged from the same 20.0% to 24.1%, but this time it had been shifted as follows:
1 22.3%
2 23.3%
3 23.1%
4 23.0%
5 22.8%
6 22.7%
7 22.5%
8 22.4%
9 22.2%
10 22.1%
11 22.0%
12 21.8%
13 21.7%
14 21.5%
15 21.4%
16 21.3%
17 21.1%
18 21.0%
19 20.9%
20 20.8%
21 20.6%
22 20.5%
23 20.4%
24 20.3%
25 20.1%
26 20.0%
27 24.1%
28 24.0%
It suddenly struck me. The start date of the policy is used as part of the interest calculation. The first policy was due to start on the 7th of the month, with the 6th having the lowest APR. The second policy starts on the 27th, with the lowest APR charged on the 26th. So to summarise my findings:
The short version
If you want to pay for your car insurance (or indeed any insurance) by monthly Direct Debit, set the payment date to the day before the start date of the policy as you will pay the lowest APR.
0
Comments
-
Ive just tried this with Prudential, and yes the APR does change, but strangely the deposit, and monthly repayments stay the same!
0 -
-
The 'money' amount you pay will be the same regardless of the payment date.
The only reason for the differing APR percentages is that if you choose a later payment date then you are paying the same in money terms but you have longer to pay it, hence a lower APR.0 -
But much better to research where you can get a 0% credit terms [LTSB/Natwest at the mo I think] or a 0% credit card and avoid the APR altogether!;)ajaxgeezer wrote: »......it's just a calculation factor rather than a change in any payments, but excellent research Greg
0 -
Privilege offer 0% APR on policies with monthly repayments 0
-
-
But much better to research where you can get a 0% credit terms [LTSB/Natwest at the mo I think] or a 0% credit card and avoid the APR altogether!;)
You would if you were an employee of an Royal Bank of Scotland Group in some of their divisions eg banks staff of RBS/Natwest or work within the group in other divisions if you were buying insurance through one of their companies eg Churchill/Natwest products0 -
They must have mistook for one of their own then :rolleyes:You would if you were an employee of an Royal Bank of Scotland Group in some of their divisions eg banks staff of RBS/Natwest or work within the group in other divisions if you were buying insurance through one of their companies eg Churchill/Natwest productsYour payment breakdown
1st instalment (Direct Debit) £23.80
Remaining 11 instalments £23.80
APR 0.0 %
Total amount payable £285.60
Or you can pay by one lump sum either by Direct Debit or Credit/Debit card. The amount payable is £285.600
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